ORDER
P.S. Bajaj, Member (J)
1. In this appeal the Revenue has challenged the validity of the impugned order dated 21/22-2-1998 passed by the Commissioner of Central Excise (Appeals) vide which he had reversed the order-in-original dated 23-10-1997 (wrongly mentioned as dated 5-12-1997 in the order in appeal) of the Deputy Commissioner confirming the duty demand of 18,10,248/- and imposing penalty of the same amount besides additional penalty of Rs. 8000/- on the respondents for violation of Rule 174 of the Central Excise Rules payable with interest at the rate of 20%.
2. The facts giving rise to this appeal may briefly be stated as under :
3. The respondents are engaged in the manufacture of products known as, frooti, Appy Pingo-Mango and Pingo-orange falling under Chapter 20 of the CETA. Their factory premises were visited by the officers of the preventive staff of the Excise Department on 22-5-1995 and it revealed that they were also manufacturing sugar syrup as intermediate product and using the same captively in the manufacture of the final product, but they neither had any Central Excise registration nor got the classification list approved. The fruit pulp, based drinks were, no doubt, exempted from payment of duty by virtue of Notification No. 2/94 dated 1-3-1994 as amended, but the Board clarified through Circular No. 75/75/94 dated 7-11-1994 that sugar syrup produced at the intermediate stage in the manufacture of the final product would be excisable and chargeable to duty under sub-heading 1702.30 of the CETA. It also revealed that the respondents suppressed the fact of the production of sugar syrup at the intermediate stage of the manufacture of their final product from the Excise Department and evaded the payment of duty. They were accordingly served with 5 show cause notices one dated 19-9-1995 for the period November, 1994 to June, 1995 for payment of Rs. 5,16,725.30 as the duty amount, second dated 3-4-1995 for the period September, 1995 to February, 1996 for payment of Rs. 2,05,662.00, third dated 4-10-1996 for the period March, 1996 to September, 1996 for payment of Rs. 5,34,888/-, fourth dated 31-3-1997 for the period October, 1996 to December, 1996 for payment of Rs. 40,687/- and fifth dated 30-7-1994 for the period January, 1997 to 13th May, 1997 for payment of Rs. 5,12,386/-. They, how-ever, contested the correctness of all these notices on the common plea that in the course of manufacture of the final products, they only prepared a sugar solution by diluting sugar in the water and the same had no marketability and as such no duty could be claimed thereon from them. They further avered that the sugar solution prepared by them during the course of manufacture of the final product, could not be equated with the sugar syrup which as per the Indian British USA Pharmacopea must contain minimum 885 gms. of sugar in 1000 CC, while the so-called sugar syrup produced by them contained total dissolved solid of 61.85% in 1000CC solution and they also relied on the test result dated 8-11-1995 given by the Research Laboratory, Bhopal after testing their sample of the sugar solution. But the Deputy Commissioner who was the adjudicating authority, did not agree with their version and confirmed the duty demand as indicated in all the above referred 5 show cause notices on them and imposed penalty of the equal amount of duty. He also imposed penalty of Rs. 8000/- on them for not taking the Central Excise registration and directed them to pay the entire duty amount with interest at the rate of 20% through order in original dated 23-10-1997.
4. The above said order in original of the Deputy Commissioner was challenged by the respondents before the Commissioner (Appeals) who reversed the same through the impugned order in appeal.
5. We have heard both the sides and gone through the record.
6. The respondents have been sought to be saddled with the duty liability of the disputed amount for the period in question on the strength of Board’s Circular No. 75/75/94-CX., dated 7-11-1994 vide which the Board clarified that the sugar syrup produced at the intermediate stage by the as-sessee in the manufacture of aerated water and Ayurvedic medicine is an excisable item and is liable to pay duty under Heading 1702.30 of the CETA. This circular superseded Board’s Circular No. 9/89 dated 25-7-1989 vide which the sugar syrup was made non-dutiable having not reached the stage of marketability, as it was produced at the intermediate stage in the manufacture of aerated water. But thereafter the Board issued another Circular No. 226/60/96-CX., dated 3-7-1996 by making reference to the Circular No. 75/75/94-CX., dated 7-11-1994, on having been informed that in the cases in which citric acid i.e. preservative, was not added in the sugar solution and the solution had neither shelve life nor marketability. The perusal of this Circular No. 226/60/96-CX shows that the Board got the matter examined from the Chief Chemist who gave his opinion on 15-5-1996 to the effect that according to IS 4925-1958 synthetic syrup may be prepared with or without the addition of citric acid, but the syrup shall not have solid contents less than 65% by weight. The only additives that shall be used in synthetic syrup would be citric acid and permitted colours.
7. In the instant case there is no reliable evidence to prove that the sugar solution prepared at the intermediate stage in the manufacture of the final products i.e. frooti etc. by the respondents with or without the addition of citric acid had solid contents i.e. sugar contents to the extent of 65% by weight or more than that. The samples were admittedly drawn from the sugar solution prepared by the respondents and got tested from the Regional Research Laboratory, Bhopal, but the same were found to contain sugar contents less than 65% by weight. The correctness of that report was never contested by the department by getting the samples retested from the Chief Chemist and as such the same had been rightly relied upon by the Commissioner (Appeals) by holding that the solution prepared by the respondents at the intermediate stage in the manufacture of the final product was not a sugar syrup which had also shelf life and was marketable.
8. Even in none of the five show cause notices referred to above served on the respondents it was alleged by the department that they prepared the so-called sugar syrup in the intermediate stage during the course of manufacture of the final products by adding preservative i.e. citric acid and had sugar contents of 65% by weight. All that avered was that they were manufacturing sugar syrup in a tank with the help of steam at a temperature of 90°C and they were using the so prepared sugar syrup in the preparation of their product, frooti by adding in the mixture of mango pulp and water in a separate tank and this very process was being carried out by them in the manufacture of their other final products i.e. Appy, Pingo-Mango and Pingo-Orange. When on conducting the examination of that syrup by the Regional Research Laboratory, Bhopal, it had been found that it did not contain soluble solid contents (sugar contents) 65% or more by weight, which was essential for bringing it within the definition of ‘sugar syrup’ as per the opinion of the Chief Chemist contained in the Board’s Circular No. 226/60/96-CX., dated 3-7-1996, then on the basis of the Board’s Circular No. 75/75/94-CX., dated 7-11-1994 no duty demand could be raised against the respondents, as the syrup prepared by them in the intermediate stage of the manufacture of their final products frooti etc. was not sugar syrup but only sugar solution as claimed by them. Consequently, the view taken by the Commissioner (Appeals) to this effect is perfectly valid and does not suffer from any legal infirmity.
8A. The suppression of the material facts by the respondents from the department has also been rightly held by the Commissioner (Appeals) in the impugned order to be not proved on record, regarding the manufacture of the final products as well as the intermediate stage product. He had opined that the respondents took L-4 licence as far back as in the year 1988 and were under the Central Excise control till the withdrawal of the duty on their product vide Notification No. 87/91 dated 11-9-1991. We are unable to disagree with the view taken by the Commissioner (Appeals) that the department had full knowledge about the preparation of the so-called sugar syrup by the respondents at the intermediate stage in the manufacture of their final products.
9. The Revenue, no doubt, has sought to produce the additional evidence in order to show that the respondents were adding the citric acid as preservative in the so-called sugar syrup and as such that syrup had a shelf life and marketability. They have also produced copy of the letter dated 22-8- 1998 allegedly sent to them by the respondents wherein they had allegedly admitted the addition of citric acid as preservative in the sugar solution prepared during the course of manufacture of the final product. But no new case can be allowed to be made by the Revenue at this stage. They cannot be permitted to travel beyond the scope of the show cause notices wherein they did not allege that the respondents were adding citric acid as preservative in the so-called sugar syrup prepared by them at the intermediate stage in the course of manufacture of final product. Moreover, even if it is assumed that through letter dated 22-8-1998 the respondents admitted the use of citric acid as preservative in the sugar solution/sugar syrup, still that would not advance the present case of the Revenue in which the period involved is much prior to 22-8-1998. This admission of the respondents may be useful to the Revenue for raising the demand for any subsequent period, but not for the period in dispute referred to above and especially for want of any allegations to that effect in the show cause notices and in the face of the report of the Regional Research Laboratory, Bhopal referred to above.
10. In view of the discussion made above, there is no merit in the appeal as well as in the miscellaneous application filed by the Revenue and both are ordered to be dismissed.